UK election relief, tech rally pull European shares to more than 1-week high By Reuters

By Sruthi Shankar and Jesus Calero

(Reuters) -European stocks rose to a more than a one-week high on Friday after the Labour Party’s return to power in the UK general election gave investors a sense of calm, while German chip systems manufacturer Aixtron rallied on reporting strong orders.

The pan-European index was up 0.4%, touching its highest level since June 26.

The UK’s blue-chip added 0.2% and the domestically oriented jumped 1.2% to a one-month high after the Labour Party surged to a landslide victory on Friday, ending 14 years of often tumultuous Conservative government.

British homebuilders outshone other sectors as the Labour manifesto promised to speed up home-building by reforming the country’s planning system.

“No matter what the political or policy outcome will be, after all the chaos we had with the Tories over the last couple of years, markets are for now taking the Labour Party’s return to power as a positive for the British economy,” said Carsten Brzeski, economist at ING.

Investors will shift their focus to the U.S. monthly payrolls report later in the day and the second round of French voting on Sunday, which will be crucial in determining the political landscape in the euro zone’s second largest economy.

Data at 1230 GMT is expected to show U.S. job growth slowed to a still-healthy pace in June, with the unemployment rate holding steady at 4%, which could leave the door open for U.S. interest rate cuts this year.

Traders are pricing in a near 70% chance of a 25 basis points rate cut by the Federal Reserve in September, as per LSEG data, and 50% odds of another cut in December.

French markets have come under selling pressure since President Emmanuel Macron called for a snap election last month, with concerns that a far-right win could add to worries over fiscal sustainability.

However, the far-right National Rally (RN) party looked set to fall short of an absolute majority after the second round run-off vote on Sunday, recent polls showed.

French stocks rose 0.3% on Friday, and looked set for their biggest weekly gain since early May.

European tech stocks topped sectoral performance with a 1.1% rise.

Aixtron rallied 16% to the top of STOXX 600 as its strong order intake for the second quarter overshadowed cuts to its full-year forecast.

Other chip firms including ASM International (AS:), BE Semiconductor and ASML Holding (AS:) climbed 0.7%-1.1%, spurred by Samsung (KS:)’s prediction of a 15-fold surge in second-quarter operating profit.

Swiss drugmaker Roche rose 0.9% after the U.S. health regulator approved its Vabysmo prefilled syringe for treating major causes of vision loss.